Facts of the Case

The Petitioner, M/s. Sunny Motors, a partnership firm engaged in the business of sale of two-wheelers, spare parts and accessories, attempted to upload Form GST TRAN-1 for carrying forward eligible transitional input tax credit under the GST regime. However, due to technical glitches on the GST portal, the filing could not be completed.

The Petitioner had earlier approached the Orissa High Court, which directed the GST authorities to either reopen the GST portal or accept the TRAN-1 application manually before the prescribed date. Pursuant to the Court's order, the Assistant Commissioner acknowledged the manually filed TRAN-1 for verification but stated that processing of the claim would remain subject to the outcome of the proposed Special Leave Petition (SLP) before the Supreme Court.

The Petitioner challenged this action as arbitrary, contending that the departmental authority could not refuse to comply with the High Court's directions merely because the Department intended to file an appeal before the Supreme Court.

Issues Involved

  1. Whether the GST authorities could defer processing of the Petitioner's manually filed TRAN-1 merely because the Department proposed to challenge the High Court's order before the Supreme Court.
  2. Whether the Petitioner was entitled to carry forward transitional input tax credit under Section 140 of the CGST Act after technical failure of the GST portal.
  3. Whether the authorities were bound to comply with the directions of the High Court and the Supreme Court regarding reopening of the TRAN-1 filing facility.

Petitioner's Arguments

  • The Petitioner submitted that despite the High Court's earlier order directing reopening of the GST portal or acceptance of TRAN-1 manually, the Department failed to implement the order in its true spirit.
  • It was argued that merely proposing to file an SLP before the Supreme Court could not suspend or override a binding judicial order.
  • The Petitioner contended that denial of transitional input tax credit due to technical glitches caused severe hardship and defeated the purpose of Section 140 of the CGST Act.
  • Reliance was placed on the Supreme Court's judgment in Union of India & Another vs. Filco Trade Centre & Another, wherein directions were issued for reopening the GST portal to facilitate filing or revision of TRAN-1 and TRAN-2 forms for all eligible taxpayers.

Respondent's Arguments

  • The Department acknowledged receipt of the manually filed TRAN-1 application for verification.
  • However, it stated that acceptance and processing of the claim would remain subject to the outcome of the Department's proposed Special Leave Petition before the Supreme Court.
  • The Department maintained that verification of the Petitioner's claim would be undertaken after further developments in the pending litigation.

Court Order / Findings

The Orissa High Court observed that the Assistant Commissioner could not postpone compliance with the Court's earlier directions merely because the Department contemplated filing an appeal.

The Court noted that the Supreme Court, in Union of India & Another vs. Filco Trade Centre & Another, had already directed GSTN to reopen the common portal for filing or revising TRAN-1 and TRAN-2 forms for all eligible taxpayers irrespective of whether they had approached the High Court.

The Court further observed that the Petitioner's case formed part of the connected matters before the Supreme Court and therefore the benefit of the Supreme Court's directions was fully available to the Petitioner.

Accordingly, the High Court directed the Assistant Commissioner, GST & Central Excise, Cuttack-I Division, to strictly comply with the earlier directions of both the Supreme Court and the High Court and process the Petitioner's claim in accordance with law.

The writ petition was disposed of with the above observations.

Important Clarification

  • Mere contemplation or filing of an appeal does not suspend compliance with an existing judicial order unless a stay is granted by the appellate court.
  • Eligible taxpayers who could not file TRAN-1 due to technical difficulties are entitled to seek relief under the Supreme Court's directions in Filco Trade Centre.
  • GST authorities must verify transitional credit claims on merits and cannot indefinitely defer processing because of administrative decisions.

The judgment reinforces the principle that judicial directions must be implemented promptly by departmental authorities.

Sections Involved

  • Section 140 of the Central Goods and Services Tax Act, 2017
  • Rule 117 of the Central Goods and Services Tax Rules, 2017
  • Transitional Input Tax Credit (TRAN-1)
  • Article 226 of the Constitution of India

Link to Download the Order

https://mytaxexpert.co.in/uploads/1785561410_2453compressed.pdf 

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